Bill giving insurance consumers restitution passes Washington state Senate

Insurance Commissioner Patty Kuderer’s bill to provide restitution to policyholders who are harmed by their insurance company or agent passed the Washington state Senate on Wednesday, 29 to 20. The bill also provides fining parity for all insurance entities regulated by the Office of the Insurance Commissioner (OIC).

“As the consumer watchdog, people expect us to help them when they’ve been harmed by a company they’ve trusted,” Kuderer. “They expect us to be able to make them whole.”

The bill, requested by Kuderer and prime sponsored by Senator Adrian Cortes (D–Battle Ground), grants the Insurance Commissioner the authority to require a company or person violating insurance laws to pay restitution.

Kuderer cited two recent enforcement cases where policyholders deserved restitution.

The OIC received 120 complaints about Seguro Medico, a sham health insurance company with a history of selling fake plans, drafting fees out of victims’ bank accounts without permission, and demanding thousands of dollars for new policies after their victims learned their initial plans were useless.

Despite defrauding victims out of an estimated $777,000, the only action Kuderer’s office was legally able to take against the company was a $100,000 fine and suspension of its agents’ licenses.

And it took action against Thin Blue Line Benefits for operating as an unlicensed insurance company. Forty-one retired state and local law enforcement officers filed complaints when their health claims were unpaid. Kuderer’s office issued a cease and desist order but could not require the company to pay policyholders back.

SB 5331 would change that and apply in all types of insurance situations. Currently:

When an insurance company uses rates that haven’t been approved by the Insurance Commissioner, there is no mechanism to order repayment to policyholders who have overpaid.
If an unauthorized insurer, like an illegal health insurer, defrauds policyholders, the Insurance Commissioner can fine the company, but cannot order it to repay the money it took.
If an insurance agent collects premiums but doesn’t forward that money to the insurance company — leaving the policyholder without coverage — the Insurance Commissioner can’t require them to repay the money they took.

'Helps deter them'

Also, the Insurance Commissioner’s authority to fine certain property and casualty insurers — which include home and auto insurance companies — is limited to $10,000, regardless of the number of violations. For health insurers, the limit is $10,000 per violation or offense; SB 5331 would align the two, allowing for per-violation fines of up to $10,000 for property and casualty insurance companies.

“Fines help incentivize the insurer or individual to come back into compliance and helps deter them from harming consumers in the future,” she added.

Washington is an outlier in how it fines property and casualty insurance companies for law violations, Kuderer said, noting that 38 states issue fines on a per-violation basis.

Most recently, North Dakota enacted legislation based on Kuderer’s bill in April 2025. North Dakota Insurance Commissioner Jon Godfread, a Republican, joined Commissioner Kuderer on the OIC’s podcast and shared why he felt compelled to get a similar bill passed in his state.

“I think there’s an assumption out there that if I go to the insurance department and the insurance company is found to be in the wrong, of course I’m going to get my money back, or of course they’re going to take care of me,” Godfread said. “And for the vast majority of the issues, we’ve been able to negotiate with the company to do that.”

Those few specific instances where they can’t negotiate with the company, however, can now be handled in a way that replaces what the consumer lost.

“We’re going to make that consumer whole, to the best of our ability,” Godfread said. “And because again, if this wasn’t a fault of their own or if this was done by a bad action of a company, you know, it’s our responsibility to make sure that they’re whole, and this law gives us the ability to do that.”

SB 5331 now moves to the House Consumer Protection & Business Committee for consideration.